Weekly Review 13-17.11.2017

Weekly Review 13-17.11.2017

“The Market’s Gotta Drop” Just Aint Working!

If the “market’s gotta drop” was a valid trading strategy, it would seem that one should have gone short on the market a long time ago. The S&P 500 and the Dow Jones have thwarted any thinking that that strategy might be a good one, setting new historic highs now for longer than any investor could have thought logical or reasonable. And that’s without a single price correction to boot! This rally has been stable and amazing and it’s hard not to wonder how much farther the market can still climb.

Eight straight trading weeks – the longest winning streak since 2013 – came to a close this past week, the Dow Jones and the S&P 500 recording light gains in summary for the week on Wall Street. The S&P 500 recorded negligible losses of 0.14%, the Dow ending marginally off by 0.32%.

A short-term technical state of oversold levels is already in place and so a price correction could lay down roots aver the coming weeks. As things have it, the loss of momentum would be expected to cloud over stocks that had extended their uptrend over the last few weeks.

Some tech stocks ended down last week, including Facebook (FB), Netflix (NFLX), and Google (GOOGL). The tech sector has seen the best gains year-to-date, the selling pressure over the last few week accentuating investors’ concerns about a postponement in the Trump’s big tax reform plan. On Thursday, stocks fell over 1%, before succeeding in capping off trading far from the bottom after news spread of the Senate’s tax initiative. The Senate proposal would be likely to push back the tax plan for another year, until 2019.

The bears are focusing on tax reform as a possible catalyst for selling pressure, but nothing in that regard has materialized. Conversation at the water coolers on Wall Street have abounded about the sharp decline on junk bold yields (JNK). The pessimistic camp is contending that the disparity between U.S. T-bonds and the yields on junk is so small that it could lead to significant problems.

Maybe… but the biggest problem now for the bears has been and still is timing. The uptrend, in the meantime, has plowed onwards through thick and thin to an extent not thought possible. The thinking, “the market’s gotta fall,” simply isn’t working. Last week we saw a small change in index movement, as the FAANG stocks slowed their advance, but there’s still no solid proof pointing to a significant downtrend unfolding.

Have a great trading week!

1 Comment

As always this is a really useful review. Thank you. The potential for upside momentum on the best US stocks almost seems limitless as the companies are becoming global mega-giants. Wasn’t it last year that Janet Yellen was warning investors that stock prices were dangerously overbought? 20% further upside later and they are still going up! It will end some day but as they say on Wall Street “keep on dancing until the music stops.”

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